Correlation Between Fly Play and Icelandair Group

Can any of the company-specific risk be diversified away by investing in both Fly Play and Icelandair Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fly Play and Icelandair Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fly Play hf and Icelandair Group hf, you can compare the effects of market volatilities on Fly Play and Icelandair Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fly Play with a short position of Icelandair Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fly Play and Icelandair Group.

Diversification Opportunities for Fly Play and Icelandair Group

0.36

Correlation Coefficient

Fly Play  Icelandair Group

Weak diversification

The 3 months correlation between Fly and Icelandair is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fly Play hf and Icelandair Group hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icelandair Group and Fly Play is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fly Play hf are associated (or correlated) with Icelandair Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icelandair Group has no effect on the direction of Fly Play i.e., Fly Play and Icelandair Group go up and down completely randomly.

Pair Corralation between Fly Play and Icelandair Group

Assuming the 90 days trading horizon Fly Play hf is expected to under-perform the Icelandair Group. In addition to that, Fly Play is 1.97 times more volatile than Icelandair Group hf. It trades about -0.14 of its total potential returns per unit of risk. Icelandair Group hf is currently generating about -0.01 per unit of volatility. If you would invest  129.00  in Icelandair Group hf on December 3, 2024 and sell it today you would lose (2.00) from holding Icelandair Group hf or give up 1.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Fly Play hf  vs.  Icelandair Group hf

Fly Play hf

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fly Play hf has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Icelandair Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Icelandair Group hf has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Icelandair Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fly Play and Icelandair Group

The main advantage of trading using opposite Fly Play and Icelandair Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fly Play position performs unexpectedly, Icelandair Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Icelandair Group will offset losses from the drop in Icelandair Group's long position.

The idea behind Fly Play hf and Icelandair Group hf pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.